A NOTE ON PERTURBATION ANALYSIS ESTIMATORS FOR AMERICAN-STYLE OPTIONS

Authors:
Michael C. Fu;Rongwen Wu;Gül Gürkan;A. Yonca Demir
Affiliations:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: mfu@umd5.umd.edu;The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: mfu@umd5.umd.edu;The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: mfu@umd5.umd.edu;The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: mfu@umd5.umd.edu
Venue:
Probability in the Engineering and Informational Sciences
Year:
2000

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Abstract

In this note, we correct an error in the paper by Fu and Hu [1] for the perturbation analysis estimator given for the gradient of an American call option payoff on an underlying asset paying multiple dividends. We then introduce a different asset price model that is more straightforward than the previous model, and derive the corresponding gradient estimators. We conclude with a brief discussion of extensions of the estimator to other American-style options.